In his State of the State address yesterday, Governor Abercrombie stated that he is proposing an increase of $1.50 to the state’s minimum wage. The minimum wage is currently $7.25 per hour. The Governor’s proposal would raise the minimum wage to $8.75. In his speech, he stated:
Today, there still exists a hard-working sector of our society that deserves continued recognition. These are the working-class residents who earn the minimum wage. The minimum wage, currently at $7.25 per hour, has not increased for over 6 years. Nineteen other states plus the District of Columbia have higher minimum wage rates than Hawaii, with less to confront in terms of cost of living.
Another component of the Governor’s proposal – which was not included in his speech – would tie the minimum wage to the consumer price index (“CPI”) each year. This means that if the CPI increases, the minimum wage would increase each year. If the CPI decreases, however, the minimum wage would the same.
My concerns about the Governor’s proposal are two-fold. First, an increase of $1.50 is pretty high; it’s basically a 20% increase over the current minimum wage. In the private sector, you never see employees getting a raise of 20%. Second, tying the minimum wage to the CPI each year is very risky, because the economy should be examined over the course of multiple years, not just one year. Additionally, allowing the minimum wage to increase based on a higher CPI, but not decrease based on a lower CPI could raise the minimum wage higher than anticipated.